Car Prices Plummeting, Thanks to Import Glut

A glut of late-model cars has been steadily driving prices for vehicles down, and a sale next week could result in even bigger discounts.

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David Lev, 10/11/11 14:49

Cars (illustrative)

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Observant consumers of the Israeli media may have noticed in recent months that there have been numerous attractive offers by rental car and auto leasing companies on late model used cars. Deals have included no money down and low interest long-term payment plans.

Clearly, many industry observers say, there is a glut of late-model cars in Israel, and it has been driving down prices – even of new cars, which are also on sale – with many models being sold at historically low prices, in relative terms.

According to business daily The Marker, though, the best deals are yet to come. The Cal Leasing Group, one of Israel's largest fleet leasing operations, plans to offer for sale “brand new” unsolc cars from the 2010 model year, at prices between 10% and 30% off their list price in the Levi Yitzchak and Yad2 price guides (“mechiron”). The reductions will result in prices of new cars with zero kilometers on their speedometers, of at least NIS 20,000 less than their list prices, and most likely much more. Ads will appear over the weekend, The Marker said, and the sale will take place next week.

The deal highlights the heavy activity in Israel's “shadow” auto sales market. Generally, auto manufacturers have a specific relationship with one Israeli importer, and anyone who wants to buy a specific brand of car has to deal with the importer. As a result, the American system of haggling with auto dealerships is almost unknown here, since there is only one supplier, and all the sales offices are owned by the importer.

In recent years, though, auto leasing companies have begun selling “remainder” cars, taking the “unwanted” merchandise off the hands of importers – at a discount – and either supplying them to companies looking to refurbish their fleets, or to individuals.

Depending on the model, buyers of new cars can get a discount or deal when they trade in their existing car; since the leasing companies do not have a monopoly on a specific brand, they are more amenable to negotiating.

However, the Cal sale is set to be the most ambitious discounting program on new cars ever attempted in Israel. The company said that it will offer extra discounts for trade ins, payment plans, and a buyback guarantee when the customer wishes to trade in for a newer model. Cars will include models from Toyota, Mitsubishi, Ford, Honda, and others.

Importers contacted by The Marker said that they weren't particularly happy about Cal Auto's plans, but that the leasing company – as well as the importers – had little choice.

“We are all stuck with large numbers of vehicles, which, for our books to balance, must be sold by the end of the year. After the model year is over, the cars are considered used, even if they have never been driven, and their price will drop significantly,” said one importer.

A leasing company official contacted by the paper said that they, too, were likely to offer a similar deal, if Cal's program worked well. “We have about 25,000 vehicles to sell by the end of the year, and at this point we're willing to try almost anything.” the official said.

On Wednesday, meanwhile, the OECD advised Israel to cut incentives for cars in order to reduce pollution. Its Environmental Performance Review stated that Israel “has made good progress in addressing air pollution, water use and some other environmental challenges, but…the fast pace of economic and population growth intensifies pressures on the environment.” It explained that encouraging the use of private cars, through financing maintenance and offering free parking at offices, promotes fuel consumption and air pollution.

The OECD suggested that the government cut taxes on cars but raise taxes on gasoline and collect tolls on highways to encourage the use of public transportation.